The AA welcomed that fact that the fuel duty increase due in April 2010 has not been brought forward and welcomed incentives for electric cars.

The increase in VAT will hit drivers at the pumps to give them a bumpy ride in the New Year, said the AA.

Based on current prices, the increase in VAT to 17.5% from January 1 will add 2.36p to a litre of unleaded petrol (from 108.91p to 111.27p), and 2.4p to a litre of diesel (from 110.17 to 112.57p).

This will bring pump prices back to the highs of last autumn and add £61.41 to the annual fuel cost of a family with two petrol cars.

The AA welcomed initiatives to promote low carbon technology.

It also supports plans to exempt electric vehicles from company car tax for 5 years and hopes that a good, affordable, stylish, well-performing, safe, longer range family electric car will come to market in the next few years.

Commenting, Edmund King, AA president, said: “The PBR brings some relief but no Christmas cheer.

"We are pleased that the Chancellor has not brought forward the projected increase in fuel duty from April.

"Petrol and diesel in the UK are already heavily taxed so the VAT increase will hit drivers.

“We welcome plans to exempt electric vehicles from company car tax for five years.

"However, most sales reps would struggle getting up and down the M1 in the current range of EVs available.

"Hopefully this will encourage motor manufacturers to bring an iconic electric vehicle to market as soon as possible.

"The AA hopes that a good, affordable, stylish, well-performing, safe, longer range family electric car will come to market in the next few years.”